Regional Differences and Firms’ Innovation Self-Choice Behavior: Insights from China

Although many studies examine the influence of external factors (e.g., financial development, institutional condition, government intervention, and degree of marketization) on firms’ innovation behavior, they are rarely related to the core issue of heterogeneity in entrepreneurship. The different levels of entrepreneurs’ characteristics usually mean huge differences in the skill level or efficiency of firms. Thus, the differences that exist in innovation ability and innovation behavior also reflect the difference of susceptibility to external factors. The core issue of heterogeneity determines not only the self-choice mode of a firm’s innovation but also the degree and pattern of an internal condition imposed by external factors, and it then influences the firm’s innovation behavior. Based on the perspective of entrepreneurship, this paper integrates heterogeneous trade theory into firms’ R&D analysis frameworks by using the data of listed companies on the Growth Enterprise Market to explore the heterogeneous influence mechanism of financial development and government intervention on firms’ R&D input. First, by constructing a theoretical model, this study finds that the innovation self-choice phenomenon exists in heterogeneous firms. A higher financial development and a lower government intervention lead to an increase in firms’ R&D input benefits. Second, the empirical research finds that financial development reduces the innovation‒cash flow sensitivity. Moreover, the reduction of government intervention alleviates the degree of capital misallocation of financial development and promotes R&D input. Third, as a moderator variable, entrepreneurs’ risk-taking propensity strengthens the promotion effect of financial development and government intervention on firms’ R&D investment. Financial development would strengthen the effect of government intervention on innovation self-choice behavior.